Frequently Asked Questions

Employee Ownership FAQs

Common questions about employee stock ownership plans (ESOPs), employee ownership trusts (EOTs), and other forms of employee ownership, from the basics to technical topics.

This FAQ is written primarily for business owners, managers, and advisors involved in setting up or running an employee ownership plan. If you're an employee at an ESOP company looking to understand your own benefits and rights, see our articles on Working at an ESOP Company and The Rights of ESOP Participants.

NCEO employee ownership FAQ hero (keyboard)

If on the date of termination, a participant’s vested account balance exceeds $7,000, but later falls to under $7,000 before distribution occurs, should a required minimum distribution be made anyway?

Participants who are not the later of normal retirement age or 62 cannot be forced to take a distribution for accounts of more than $7,000. So companies cannot require an individual to take a distribution if the balance exceeds $7,000 at the time a distribution is to commence. If you have the participant's consent, however, you can make the distribution. The plan could require an immediate cash out at termination of balances of $7,000 or less. If the amount drops to below $7,000 at distribution, a mandatory distribution could occur, but if the plan document calls for the value to be assessed at termination, then these provisions conflict, and the plan probably should be redrafted to allow for that assessment when the distribution will occur.

Link to this FAQ Topic: Distributions & Repurchase